Ghana is in a debt crisis. Nigeria is still debating whether it is in one, too.
Key takeaways:
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Borrowing is second nature to sovereigns across the world. But African countries like Nigeria and Ghana shy away from the conditions in which it is wise to borrow.
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Governments should borrow for important things. But even when debt is used for productive purposes such as infrastructure or education, it may not always be a wise decision.
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All debt comes at an additional cost and must eventually be repaid. So, sovereigns should borrow when their financing alternatives are more expensive than their debt and when they are confident of higher earning potential in the future.
Enduring concerns about Nigeria’s debt has polarised debt conversations and fueled an anti-debt narrative. This is misplaced. Sovereigns like Nigeria need debt.
Debt accumulation is as close as we get to magic in economics. You have a sovereign
